Center for the Protection of Intellectual Property Opinion: As Investment Moves Overseas, the US Must Restore its Gold-Standard Patent System, by Kevin Madigan
This post originally appeared in the Center for the Protection of Intellectual Property on June 22, 2017.
Venture capital investment in the United States has declined steadily for years, as investors abandon an uncertain domestic climate for more reliable opportunities in foreign countries. In a report on the current state of the entrepreneurial ecosystem, the National Venture Capital Association emphasizes the extreme decline in the US share of global venture capital in the last twenty years, highlighting a drop from 83% of global share in 1996 to just 54% in 2015. At a time of decreasing investment, the US should be working to improve its innovation ecosystem, providing stable and effective property rights to inventors so that VCs can once again feel confident that investments in startups’ R&D—secured by patent rights—won’t just be stolen by established and better-financed infringers. Unfortunately, its doing just the opposite. Over the past decade, the US has continued to gut its patent system of the protections and incentives that attracted investment and made it the world leader in cutting-edge innovation in the first place.
While these numbers are certainly cause for concern, they don’t surprise patent law experts such as former Director of the USPTO, David Kappos, who sees the shift in investments as a natural result of the continuing erosion of IP rights in the US. He warns that “[w]hen investment incentives are reduced, you can expect investment to move elsewhere.” And although a variety of factors are likely contributing to the shift of investments outside of the United States, continuing to weaken our patent system will only aggravate this worrisome trend as VCs increasingly look outside of the US for better returns on their investments.